Life of Romanian real estate developers complicated by war in Ukraine

Customers' interest in buying apartments has been declining over the last two weeks, in the context of the situation in Ukraine, Sorin Greu, vice-president of the Federation of Employers of Construction Companies (FPSC), said during a press conference on March 14.

"As far as we know, Libra Bank has already stopped financing in the real estate sector, and the final buyer is currently waiting to see what happens to this situation in Ukraine and Russia," he explained, according to Economica.net.

The Bank on March 15 denied interrupting the mortgage lending. "The residential area remains an important niche for the bank. We have not stopped any ongoing financing, but we are currently conducting an intensive prudential analysis to incorporate the new international impact, and this may lead to longer response periods," Libra Bank explained.

While the war in Ukraine is an undeniable driver for the local housing market, the effects are mediated by the interest rates that are likely to increase. Combined with rising inflation and possible deterioration in households' real incomes, this has naturally made banks increasingly cautious.

The FPSC vice president noted that many real estate developers have also decided to put real estate projects on standby in the last two weeks. But this is more likely an effect of the rising prices of the construction materials that are eroding real estate developers' hefty profit margins for the first time.

In the long term, the situation in Ukraine will have the effect of increasing the prices for apartments, the president of the FPSC, Cristian Erbaşu, explained. In a year or two, when the market returns to normal, the prices will be 50% higher or even double, he also stated.

"The market is speculative, that's how it is," he explained, adding that the buyers will have no other option than to accept the higher prices at the end.

Others, however, believe that there's is a large number of unused apartments in the first-tier cities, including Bucharest, that can not be kept for capital gains indefinitely and will eventually push down the rents hence the housing market as a whole.

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